Executive Briefings

Despite Steel Glut, China Buys Into Africa's Steelworks With Eye on Future Demand

Africa's second-largest iron-ore mine, in Tonkolili, Sierra Leone, was snapped up by China's state-owned Shandong Iron and Steel Group in April. In fact, Chinese firms, it seems, are buying into the market while stocks are cheap. Hebei Iron and Steel Group is building a massive steelworks in South Africa; last month it received approval to takeover the Swiss firm Duferco's African steel processing and sales network.

Despite Steel Glut, China Buys Into Africa's Steelworks With Eye on Future Demand

China's motives? To some, it looks as if it simply wants to export its domestic pollution abroad. Officials are desperately trying to close dirty domestic steel plants. Persuading China's Iron and Steel Association to do their business in Africa neatly blends environmental concerns with the government's geopolitical motives to push investment into the continent.

Moreover, China already produces too much steel – as much crude steel a year as the rest of the world combined - 822m tonnes in 2014.

There is a more favourable interpretation, however: that Chinese firms are taking a longer view of Africa’s potential. African steel demand is expected to hit 3 million tonnes per year by 2050, according to Mysteel.net, a Shanghai-based trade publication. And an African source of iron ore and basic steel could also give China a more stable supply.

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China's motives? To some, it looks as if it simply wants to export its domestic pollution abroad. Officials are desperately trying to close dirty domestic steel plants. Persuading China's Iron and Steel Association to do their business in Africa neatly blends environmental concerns with the government's geopolitical motives to push investment into the continent.

Moreover, China already produces too much steel – as much crude steel a year as the rest of the world combined - 822m tonnes in 2014.

There is a more favourable interpretation, however: that Chinese firms are taking a longer view of Africa’s potential. African steel demand is expected to hit 3 million tonnes per year by 2050, according to Mysteel.net, a Shanghai-based trade publication. And an African source of iron ore and basic steel could also give China a more stable supply.

Read Full Article

Despite Steel Glut, China Buys Into Africa's Steelworks With Eye on Future Demand